By Whitney Kisling Aug. 13 (Bloomberg) -- U.S. stocks rose for a second day after billionaire John Paulson’s hedge fund bought shares in banks and Wal-Mart Stores Inc. reported better-than-estimated earnings. Bank of America Corp., Goldman Sachs Group Inc. and Regions Financial Corp. rallied after Paulson, whose Credit Opportunities Fund surged almost sixfold in 2007 on bets against subprime mortgages, bought stakes in the companies. Walmart, the largest retailer, added 2.2 percent. The market’s advance was limited as government reports showed retail sales unexpectedly fell last month and initial jobless claims topped forecasts. The Standard & Poor’s 500 Index gained 0.1 percent to 1,007.07 at 9:37 a.m. in New York. The Dow Jones Industrial Average added 0.1 percent to 9,269.55. European shares rallied after the German and French economies unexpectedly expanded in the second quarter. Asian stocks also advanced. “The news on the economy is that it’s recovering, the news on corporate profits is that they’re recovering,” said Nick Sargen, chief investment officer at Fort Washington Investment Advisors in Cincinnati, which oversees more than $27 billion. “That’s what’s bolstered the stock market.” Financials also gained today as the Libor-OIS spread, a gauge of banks’ reluctance to lend, narrowed to 25 basis points, a level former Federal Reserve Chairman Alan Greenspan considered “normal.” The S&P 500 rose 1.2 percent yesterday after the Federal Reserve said the recession is easing, while pledging to keep its benchmark interest rate near a record low, and analysts boosted their outlook on insurers. Valuations Climb A 49 percent rally from a 12-year low on March 9 left the S&P 500 trading at 18.6 times the profits of its companies as of Aug. 7, the highest valuation since 2004, according to weekly Bloomberg data. Alcoa Inc., the largest U.S. aluminum producer, gained 3.5 percent to $13.41. Freeport-McMoRan Copper & Gold Inc., the world’s largest publicly traded copper producer, added 2.8 percent to $64.74. Copper climbed to the highest price since October as renewed economic growth increased demand for industrial metals. Aluminum, zinc, lead and nickel all rose. Gold advanced for a second day. Crude rose above $71 a barrel in New York on speculation that demand will strengthen. Walmart posted second-quarter profit of 88 cents a share, compared with analysts’ estimates of 86 cents. The stock added 2.2 percent to $51.63. Paulson Buys Banks Bank of America rallied 5.9 percent to $14.79. Paulson’s hedge fund bought 168 million shares of the company in the second quarter, a regulatory filing showed, becoming the lender’s fourth-largest shareholder. Regions Financial Corp. climbed 9.1 percent to $5.26 after Paulson also bought 35 million shares, becoming the second-largest stakeholder in the Alabama bank. Citigroup Inc., the bank rescued by a $45 billion U.S. bailout, increased 2.8 percent to $4.09 after the shares surged 7.9 percent yesterday. General Electric Co. advanced 1.6 percent to $14.35. The world’s second-biggest maker of wind turbines expects a pickup in offshore wind-power projects in Europe as governments provide more financial backing and designs improve, said Victor Abate, who runs GE’s renewable energy businesses. LDK Solar Co. slumped 12 percent to $9.86. The Chinese maker of silicon wafers used in solar power cells reported a second-quarter loss that was wider than analysts expected on costs to write down the value of products held in inventory. Per-share earnings topped analysts’ estimates by 10 percent on average for the 458 companies in the S&P 500 that have released results since June 17, according to data compiled by Bloomberg. Profits slumped about 30 percent in the period, a record eighth straight quarter of falling earnings. To contact the reporter on this story: Whitney Kisling in New York at wkisling@bloomberg.net.

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